The Telegraph
Since 1st March, 1999
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Court nail in Napster coffin

San Francisco. Sept. 4: The chief executive of Napster said on Tuesday that the company was headed for liquidation and later resigned and laid off his staff. The move appears to be the final chapter in the story of an internet business that allowed millions of people to exchange music for free online but was undone by lawsuits by the recording industry.

Konrad Hilbers, Napster’s chief executive, made his comments after a bankruptcy judge ruled that Napster not be allowed to sell its assets to Bertelsmann, the German media giant. Napster, which had previously filed for bankruptcy protection, was looking to Bertelsmann as the probable, if not sole, candidate to revive it and restart it as a pay service that would reimburse record companies when their songs were exchanged.

Judge Peter J. Walsh, of the US bankruptcy court in Delaware, ruled that Napster’s proposed sale of its assets, including the brand name, was not made in good faith because Hilbers had “divided loyalty” between Napster and Bertelsmann.

The judge said that the negotiations by the companies were tainted because Hilbers had “divided loyalty”.

The ruling underscores the already complex relationship of Bertelsmann and Napster, based in Redwood City, Calif. Hilbers, in an interview on Tuesday, said, however, that he “disagrees with the judge totally,” and that he was still trying to understand why the judge had deemed the situation to be a conflict of interest.

Whatever the reason, Hilbers said, the decision signals the probable end of the company, which was started by Shawn Fanning, a college student, and became the fastest-growing service on the internet, with more than 80 million registered users at its peak.

The ruling means “liquidation for the entire company,” Hilbers said, asserting the company would soon modify its bankruptcy filing from Chapter 11, which enables a company to reorganise, to Chapter 7, which entails selling off the assets.

On Tuesday night, Hilber laid off 42 people, including himself, because there was no money to pay salaries, Napster said, leaving only two staff members to oversee the bankruptcy.

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